Finance Bill 2014 – Changes to ARF’s & AMRF’s

The Finance Bill was published on 23rd October 2014, and included a number of proposed changes to the treatment of Approved Minimum Retirement Funds (AMRF’s) and Approved Retirement Funds (ARF’s).

Approved Minimum Retirement Funds (AMRF’s)

Currently any growth in the value of an AMRF over the initial investment amount can be withdrawn by the client as a taxable distribution.

This option is now being removed. Instead, the client will have the option to withdraw 4% of his or her AMRF value in any one year. This will be based on 4% of the value of the plan as at 1st February in that year. The proposed date for this change is 1 January 2015.

One important implication here is that current AMRF’s showing substantial growth will only allow access to 4% of the total fund value from 2015. Some clients may wish to withdraw this growth before the end of 2014, as access will be restricted to the 4% figure in 2015. AMRF withdrawals continue to be treated as taxable income.

Approved Retirement Funds (ARF’s)

ARF’s currently make a taxable distribution of 5% of the ARF value each year for the majority of clients. From 2015, the relevant % will be as follows:

· No minimum withdrawal before age 61 (no change).

· From age 61 the minimum withdrawal will be 4% of the plan value (down from 5%).

· From age 71 the minimum withdrawal rises to 5% (the current rate).

· ARF’s over €2 million must withdraw 6% per annum from age 61.

There is no change to the valuation date of 1st November for ARF distributions, and clients are of course free to take more than these minimum amounts if required. ARF withdrawals will also continue to be treated as taxable income.

Implications for Clients

Access to AMRF funds before age 75 is welcome, although limited. For example, an AMRF of €65,000 allows access to just €2,600 per annum before tax, hardly a life changing amount.

The ARF changes are also fairly cosmetic, but they do allow clients further control over the rate of withdrawal, which is welcome.